‘No win, no fee’ change could be big deal for travel

Agents and operators could face fewer personal injury claims as a result of legal reform proposed last week.

The changes to the “no win, no fee” systemproposed by appeal court judge Lord Justice Jackson could “change the landscape” of claims against travel companies, some lawyers believe.

Under the existing system, which has been criticised for encouraging speculative claims, losing claimants do not have to pay legal costs.

The reforms propose claimants should foot the legal bill themselves if they lose. The potential costs of claiming are also set to increase under plans to scrap insurance covering lost cases.

Defendants would largely have to pay their own legal costs, whether they win or lose, and will have to pay the claimant’s legal costs should the claimant win.

Abdulanesh Alaraqu director of Brit Claims said the reforms would discourage speculative cases.

“At the moment, there is an ethos of ‘we might as well have a go’, but if the costs to pay should people lose increase, they may not be so willing to take action,” he said.

“It means lawyers will only want to take on strong cases. This will change the legal landscape of claims against travel companies.”

Claimants who win will be eligible for compensation payments that are 10% higher than now.

However, travel firms could still pay less if they lose, because a cap would be introduced on what a claimant’s lawyer can claim as a success fee.

The reforms are due to start in 2012.

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Reinsurance market performs as intended

Aon Benfield has released its latest Reinsurance Market Outlook report, which provides an overview of the trends witnessed at the 1st April reinsurance renewals.

The intermediary reveals that despite “a string of meaningful insurance events” and associated adjustments in pricing, the decline in US and European property catastrophe rates continues.

Few European programmes renew at 1st April but with regard to the US, the season saw property catastrophe rates for programmes including hurricane risks decrease by 5% to 10%.

Furthermore, the broker is predicting that the June and July renewals period will find price changes of flat to down 5%, for US hurricane-driven programmes.

The Japanese earthquake on 11th March did affect the renewals process, as many insurers opted to extend current programmes while losses were being assessed.

Where Japanese renewals took place, the costs of typhoon programmes increased by 5% to 10%, while most earthquake programmes increased within a range of 25% to 50%.

Aon Benfield Analytics chairman, Bryon Ehrhart, sums up: “The reinsurance market remains functional with its existing capital base, and we do not anticipate the need for material new capital flows into the reinsurance market to satisfy insurer demand for catastrophe reinsurance based upon the global events to date.”

He adds: “Throughout the recent, significant global events, reinsurance responded to the needs of global and regional insurers as intended, with material volatility shifted to reinsurers from the balance sheets and income statements of global and regional insurers.”

Also of note, reinsurance programmes covering New Zealand, where a second major earthquake struck Christchurch in February, do not renew at 1st April.

Last month, Aon Benfield formed a Market Analysis team within Aon Benfield Analytics in a move aimed at allowing Aon Benfield Research to focus entirely on academic and industry collaboration.

Lord Chancellor faces legal action over discount rate review

The Association of Personal Injury Lawyers (APIL) says it is taking legal action because the Lord Chancellor has failed to review the discount rate, despite announcing in November of last year that a review was taking place.

The discount rate is used to calculate the amount deducted from an injured person’s compensation to account for any income he or she may receive from investing their damages.

In 2001, the rate was set at 2.5%, based on yields generated by index-linked government stock (ILGS).

Since then, yields on ILGS have gradually declined and according to APIL, over the last three years the average gross yield has been less than 1%.

APIL has now issued proceedings for a judicial review, stating that the Lord Chancellor has failed to complete a review or provide a timetable for it.

The Association’s president, Muiris Lyons, says: “We are gravely disappointed that the Government has failed to carry out its review as injured people are continuing to be undercompensated, in some cases, by hundreds of thousands of pounds.”

He adds: “It has been nine months since we first brought this issue to the attention of the Lord Chancellor and we find it unacceptable that no meaningful progress has been made since then.”

Reaction to Jackson reforms (claims management reform)

Following the close of the consultation on February 14th, the Brit Claims was totally bewildered at Tuesday’s announcement bearing in mind the Ministry of Justice had received in excess of 600 responses to the Green Paper, plus statistical evidence. It seems most unlikely that each one of those responses could have been given the appropriate consideration they deserved, which, coupled with the Ministry’s lack of hard evidence from an impact study, could only lead the Brit Claims to deduce that the full implementation of the Jackson report was somewhat pre-determined.

The unintended consequences of this are all going to impact the deserving claimant and affect their access to justice. By extending the RTA portal into employer’s liability, public liability and low value clinical negligence claims, together with the raising of the fast track claims limits, means that 95% of claims will now be dealt with in this manner. How can the Ministry justify these wholesale changes to the system for 5% of the remaining claims? It is totally disproportionate.

Claims management companies and lawyers are being blamed for the rising cost of insurance premiums but as the Transport Committee identified it is the insurers who are the largest generators of referral fees (without the consent of their policy holders) and in reality if they hadn’t priced their premiums incorrectly over the last 5 years on the aggregator sites, trying to gain market share, then they wouldn’t have been left looking for someone else to blame.

There are too many unanswered questions and far more work needs to be done prior to any sort of implementation.

The show isn’t over UNTIL the Bill is signed by the Queen: so there is still EVERYTHING to play for in persuading MPs that Lord Jackson is wrong, Lord Young is wrong and the Government is wrong, and that they should think again how this legislation will affect Access to Justice for the ordinary man and woman.

WILL YOU STAND AND FIGHT FOR YOUR INDUSTRY?

The battle is now well and truly on.

I am sure you will by now know the outcome of the Government’s so called consultation on implementing Jackson.

Earlier this week, we circulated a short briefing on the main headlines and also a briefing on the next wave of consultation for “reform”.

The Government intends to abolish recoverability of success fees and ATE premiums.

This is bad news for personal injury claimants and those who represent them. The only winners are the insurance lobby.

It is obvious to all we are up against a foe who has no regard for access to justice, and will not allow the facts to get in the way of ideologically driven change for the benefit of the insurers.

This is your chance to understand how Jackson will affect you.

The show isn’t over until the Bill is signed by the Queen: so there is still everything to play for!

MPs, and leading industry figures will give you their insight into implementing Jackson; hear about the future of the sector from experts on Alternative Business Structures and the RTAPortal. Hear from the Access To Justice Action Group about the continued fight to change the legislation

Claim Management, are the MOJ regulations toothless? At street level it appears to us that there are many people / companies providing claims management facilities who are not and have no intention of being regulated.

Personal injury claim management.

Every single time someone tries to influence change in anything in life you have three types of reaction. 

Those who oppose change blindly, usually without any real understanding of what the change represents because it is a knee jerk reaction to an anticipated pain in the pocket. Their normal words are announcement has been done but cannot be implemented.

Those who will say that it doesn't go far enough but they fail to comprehend that progress isn't made in leaps and bounds but in tiny steps. Their every steps is perceived in negative thought, juts make their heart believe all is well. 

Seldom do any of these first two types ever have ideas of their own or even consider for a second being constructive because it is much less effort to heckle than to try and solve a problem. 

The third type is the silent majority (and I still have trust that they are a majority) will accept the change for what it is, simply a step forward on the evolutionary chain so that things can get from how they were... to how they should be. This category is mainly academically educated. 

I don't believe that the regulations are toothless, they are simply a first step. There are problems - yes, but there are also people working very hard to iron out those problems. At times people are being imposters and disguising solicitors with use of authorised companies details, in the name of sister company or we are simply working under the umbrella.

Unfortunately ever since Brit Claims has been regulated (not much long ago) it has been victim of such fraud. However at present matters are under investigation, but this cowboy style mechanics and cab runners wants to advice legal matters to clients, despite having very very limited knowledge about it, in the hope of getting easy and quick money through injury claim. This very attitude undermines those who wants to really help clients, and give legal and fair advice. http://www.britclaims.co.uk

No win no fee reforms divide insurers

The Government plans to make claimants who win their court case pay their own solicitor's "success fee" and the premium for any After-The-Event (ATE) insurance out of the compensation they are awarded.

The decision comes despite disagreement from around 70% of those who responded to the Ministry of Justice's November 2010 consultation paper.

Other measures to be implemented by the Government include a 10% increase in general damages; a 25% cap on the success fee that can be deducted from damages in personal injury cases, and a system of 'qualified one way costs shifting' (QOCS). This will mean that in almost all cases personal injury claimants who lose their action will not be liable to pay the defendant's legal costs.

Claimant representatives and after-the-event (ATE) insurers, however, maintain that abolishing the recoverability of success fees and ATE premiums will restrict access to justice and put claimants' damages awards at risk.

Defendant representatives and general liability insurers, on the other hand, are in favour of the changes, pointing to the disproportionate costs caused by the current regime where, according to one insurer, claimant's costs in personal injury claims in 2010 represented, on average, 142% of the compensation received.

In a response paper published this week the MoJ said its reforms were necessary to rebalance the civil litigation system in England and Wales:

"Some weaker cases which are currently brought will be deterred," (80-page / 1.05 MB PDF). "Taken as a whole, the package of measures will restore a much needed sense of proportion and fairness to the current regime – not by denying access to justice, but by restoring fair balance to the system. Defendants should benefit from more proportionate total legal expenses, with legal costs for the NHS falling by around a third."

In a separate consultation paper also published on 29th March, the MoJ set out further proposals for actions brought in county courts, including raising the small claims limit so that more cases are dealt with quickly on an informal basis, and extending the scope of the streamlined process for dealing with low value road traffic accident personal injury claims introduced in April 2010.

Recoverability

The reforms implement key recommendations made by Lord Justice Jackson in his January 2010 report on civil litigation funding. Central to those recommendations was the issue of recoverability of success fees and ATE premiums.

At present many civil actions (and the vast majority of personal injury claims) are brought on a 'no win no fee' basis under a conditional fee agreement (CFA) with a lawyer, backed up by ATE insurance which covers the claimant against the risk of having to pay the defendant's legal costs if the claimant loses the case.

If the claimant wins, the defendant (or its insurers) must, in addition to the claimant's solicitor's basic costs, pay the lawyer's success fee and an enhanced ATE premium. But if the claimant loses the case, no ATE premium or success fee is payable and the ATE insurance will cover the claimant's liability to pay the defendant's legal costs. As a result, cases can be brought at no financial risk to the claimant.

Under the Government reforms, however, recoverability will be abolished and claimants will have to pay the success fee and premium themselves. There will be one limited exception. In clinical negligence cases, ATE premium relating to the cost of expert reports will remain recoverable.

In addition, in personal injury cases, the amount that can be taken out of a claimant's damages to pay the success fee will be capped at 25%. This means damages covering care and loss will be ring-fenced from any success fee deduction, protecting future care costs.

As part of the package, the Government will also introduce a 10% increase in 'non-pecuniary' general damages for all claimants, such as damages awarded for pain, suffering and loss of amenity.

Responses

Seventy one per cent of those who responded to the November 2010 consultation paper disagreed with the proposal to abolish recoverability of success fees, with views clearly divided along claimant and defendant lines. Similarly, 69% of respondents thought ATE premium should remain recoverable from the defendant.

There was more consensus in favour of the 10% increase in general damages, although in most cases this was because respondents thought damages awards are too low.

Even though it will increase their compensation bill, however, most general liability insurers who responded supported the increase as part of an interlocking package of reform.

Qualified one way costs shifting

QOCS will remove the risk that, if he loses the case, a claimant will be liable to pay the defendant's costs - except in limited circumstances.  Those are: 'exceptional behaviour' (where the claimant has acted fraudulently, frivolously or unreasonably) and where the claimant is very wealthy.

The proposal has been criticised because claimants will not know for certain from the outset whether or not they will qualify for QOCS.

At the moment, the Government is only proposing to introduce QOCS for personal injury cases including clinical negligence claims. The normal costs principle that the loser pays will continue to apply in other cases.

One consequence - not unwelcome to the MoJ - is that QOCS will drastically reduce the need for claimants to take out ATE insurance, which covers them against the risk of having to pay the defendant's costs. The paper adds: "When they do, they will pay the premium themselves, which will encourage the market to set more reasonable premiums".

Other measures

The MoJ plans to tighten up the 'part 36' rules on settlement offers. An additional sanction (equivalent to 10% of the value of the claim) will be payable by a defendant who does not accept a claimant's reasonable offer that is not beaten at trial.

There will also be a new general rule that only reasonable and proportionate costs may be recovered from the losing party, taking into account the value, complexity and importance of the claim.

In addition, the Government proposes to lift the current restriction on contingency fees (damages-based agreements or DBAs) in the courts of England and Wales.

DBAs are another type of 'no win no fee' arrangement where the lawyer's fee is related to the amount of damages awarded rather than the work done by the lawyer. If a claimant wins the case, the costs recovered in the normal way from the other side would be set off against the 'DBA fee' due to the claimant's lawyer. In personal injury cases, the amount lawyers could deduct from the damages would be capped at 25%.

Next steps

Changes to the CFA regime will require the Government to pass primary legislation while some of the other changes can be effected by amendments to the court rules.

The paper does not include a timetable for this, but the Government says it wants to see the measures implemented together, as a package.

Football player who claimed £1.3m for car accident injuries jailed after he was caught playing for club

An amateur footballer has been imprisoned for a year after trying to scam a £1.35 million insurance pay-out for injuries received in a car crash, despite being fit enough to turn out for his club.

James Shikell, 31, was a passenger in a car accident in 2002 and three years later was awarded the personal injury claim by the Motor Insurers' Bureau.

Shikell, a midfielder who has played nine games for Doncaster side Edlington Rangers this season, claimed in December 2005 he suffered memory loss, severe fatigue, poor co-ordination and an aching neck and ankles. 

And as part of his claim he received £30,000 - and out of the total claim, that is all he received.

In a witness statement Shikell had said: ' I am deeply saddened that as a result of the injuries I sustained in the accident I am no longer able to play football.

'I still love football and not to be able to play as I did before is very depressing for me.' 

He was found out in 2008 when investigators filmed him playing a 90-minute game and discovered he had played every match that season.

As a result Shikell, from Balby Doncaster was jailed for 12 months for contempt of court.

In addition his father, Robert Shikell, received a year's imprisonment for supporting his son's claim. And a third man, Simon Fennell, was fined for providing a false statement in the personal injury claim.

Judge Penelope Belcher, presiding at Leeds Combined Court, found Shikell guilty of 14 of the 16 counts against him. 

She said she was satisfied beyond all reasonable doubt that the only explanation for him telling the lie was to increase the likely award of damages in the personal injury claim.

She said: 'I recognise that it was down to this young man's grit and determination, together with the love and support of his family, that he made such a good recovery from his injuries and their effects upon him and that he is now largely able to lead a normal existence. That is very much to his credit.'   

But she added that did not alter the fact that he was willing to lie for the purposes of the legal proceedings.   

She said: 'It is James Shikell's case that his intention when he lied about his football activities was not deliberately to seek to increase the award of damages and he denies being motivated by greed.'  

Elaine Chapman, a partner at law firm Weightmans who advised the Motor Insurers' Bureau in the defence of the personal injury claim and in bringing the contempt of court claim, said aftgerwards: 'This landmark judgment sends a clear and resounding message that high value cases are no longer the no lose gamble for individuals making fraudulent claims. 

'The custodial sentences imposed reflect the zero tolerance approach of the judiciary towards insurance fraud.'  

Motor Insurance Bureau chief executive Ashton West added: 'This custodial sentence will be a deterrent to those who seek to defraud MIB and therefore every insured driver in Britain.'